1.5 billion USD Investment in Petrochemical Conglomerate of Supsa

November 13, 20172,474 Views

New Energy Hub Attracting Global Investors

Construction of an oil-petrochemical complex worth 1.5 billion USD will begin in Supsa, Georgia, in 2018. This global project will be undertaken by the GEOPARS Company. The Government of Georgia has already allocated 200 hectares of the land to the company under the 1,5 billion investment obligation. The new complex will process 100,000 barrels of crude oil per day, that is, 5mln tones per year.

The investors believe, that in the near future Georgia may become an exporter of oil and petrochemical products. It is planned to involve several major investment companies the project.

CEO of the GEOPARS LLC Mr. Lasha Koridze talks about the company’s plans and the expected economic benefits of the oil-petrochemical complex.

Why this project, and why now?

We had an oil refinery in Georgia during Soviet times, but we have never had a petrochemical production facility. The project will have positive effect on the country and that is why the Government of Georgia announced its full support to our project in 2016.

Success of the project derive from Several factors, and these include geographical location of the country and attractiveness of the Silk Road project, which will offer the shortest Eurasian energy supply route. Currently Georgia underutilizes these opportunities, And We hope to have our contribution in maximizing benefits for the country.

What will be the complex’s production capacity, will it be able to mobilize enough resources and will it have a diverse supply?

The annual production capacity of the complex will be 5mln tones of oil products, that is 100,000 barrels a day processing capacity. Georgia consumes 1.2mln tones of oil products, so the complex will cover 100% of Georgia‘s consumption, leaving the rest to be exported. For this reason we remain open to new investment offers from other countries, and are conducting negotiations with several international funds that have shown an interest in this opportunity.

Naturally we are working on building a diverse supplier list. To this end we are working with the ARGUS Company, which will explore all available sources of raw materials, make corresponding economic calculations and offer substantiated proposals. We are negotiating with Turkmenistan, which is one of the major oil extraction countries and has 4mln tonnes of free reserves, and a major oil field is due to open in Kazakhstan, from where additional resources can be obtained. This project should be attractive for Azerbaijan as well. We are creating an energy hub of regional importance.

What economic benefits will Georgia gain from this project?

Such projects bring financial stability and safety guarantees. We plan to involve major international companies such as Trafigura, PetroChina, Turkmen Petroleum, ENOC, Exxon Mobile, Gunvor and others at various phases, and this will send a message to investors about the attractiveness of Georgia‘s investment environment. These companies shape the global oil market, and twenty years ago they would not have contemplated investing in Georgia‘s oil sector.

According to our estimates, Georgia spends nearly 500-600 mln USD annually on importing oil products, and partly replacing these imports is important because it will mean that comparatively cheaper products are supplied to the population. Transportation raises price at least by 10%.

Initially the complex will employ 800 persons, but after it is fully constructed the figure may increase.

You have mentioned cheaper products. Will the company produce top quality oil products, and if so, which?

The complex will manufacture EURO 5 and higher standard fuels. We have examined the market, and due to the growing demand for petrochemicals we will be concentrating on this area. However, we will be able to produce all types of oil product, as this will be an oil-processing complex.

When will the construction work begin, and what stage is it currently at?

We plan to begin land preparation works by the end of summer 2018. We will have finished the first phase by 2021, and the whole project by the middle of 2022. At present we have finished the geological, topographical and archaeological analysis of the territory and have prepared the appropriate reports.

The WorleyParsons Group – Advisian, won our tender to prepare a comprehensive feasibility study. Argus will conduct market research, and then an environmental impact report and a detailed project analysis will be prepared. Due to the scale and importance of this project we will remain open throughout for all investors and interested parties.

Part of the highway runs through the construction site, and the Ministry for Regional Development has provided all the necessary communications. We have had meetings with Georgian Railway and agreed to lay 5.5km of railroad from Supsa Station to the complex, which will be able to carry 5 mln tonnes of raw materials.

Will you meet ecological standards, which is a key challenge of most projects?

The complex will be equipped with EU-standard equipment and filters. As the complex will produce EURO 5 standard products and above, ecological protection is a priority area. There are a number of examples from other countries, such as Switzerland, Italy and Austria, of similar complexes being built within cities, and we will follow these international standards.

Where do you plan to attract qualified staff from? Do you plan to offer a training platform?

Under agreement with the Government of Georgia, 70% of our employees will be local residents. We do not have an educational tradition in this field locally, but we will be bringing in field specialists from abroad to train the Georgian staff.

Is there any threat which could hinder or prevent project implementation?

I do not think so. The Government of Georgia is backing the project. In regional terms this complex is economically profitable and necessary. Georgia has become an interesting country for making investments in, despite the geopolitical realities surrounding it. It is the safest country in the region, with liberal legislation and free of corruption, and the attractiveness of its investment climate has been proven by recent Ease of Doing Business indicators.